September 01, 2017

On Wednesday Patently Apple posted a report titled "Bain Capital along with Apple Offer Last-Ditch Bid for Toshiba's Memory Chip Business." The report noted that a consortium led by Bain Capital and including Apple Inc had offered a revised last-ditch bid for Toshiba Corp's prized memory chip unit worth $18 billion. Apparently the new bid has turned the bidding into a whole new phase that was unexpected. Today we learn a little more about Apple's involvement.

Today we're learning that Toshiba's sell-off of its semiconductor business has been set back to square one. The Japanese daily Nihon Keizai Shimbun reported yesterday that Toshiba will resume negotiations with three groups -- the new US-Japan alliances, the Korea-US-Japan alliance and the Hon Hai alliance. The market's prediction that Toshiba would give exclusive negotiation rights to the new WD-led US-Japan alliance in August has turned out to be wrong.

It was Apple that changed the game.Apple had recently joined the Korea-US-Japan alliance by promising to pay 300 billion yen (2.76 Billion US). Apple's participation means more than just securing an investor to the Korea-US-Japan alliance. The participation of Apple, one of Toshiba's biggest NAND flash customers, means that Apple began to pressure Toshiba not to sell its semiconductor business to WD.

According to market researcher DRAMexchange, WD's NAND flash market share in the second quarter stood at 17.5%, which is similar to that of Toshiba. When combined, the market share will hit close to 35%. This means that WD will be able to launch a two-frontrunner race with Samsung Electronics which chalked up a market share of 35.6% in the same period. "This is a case showing how big customers in the semiconductor market are wary of a phenomenon leaning on one side in the semiconductor industry," said a high-ranking official of the Korea-US-Japan alliance. "Apple began to keep NAND flash makers in check for fear of seeing the balanced NAND flash market lose its balance."

Another reason why Apple joined the Korea-US-Japan alliance is that Apple wants to secure the stable supply of NAND flash memories. The storage capacities of major electronic products such as smartphones have been on an upward spiral, intensifying competition to secure high-capacity Nand flash memories.

The Korea-US-Japan alliance is employing a strategy to notch up a come-from-behind win at the eleventh hour by persuading Toshiba's board of directors, while advocating "balance and growth." Its blueprint is to guarantee Toshiba's management rights to the utmost and grow together while achieving technological synergies.

The report lastly noted that there's still a small chance that the Foxconn,Softbank, Google bid could win because it's offering the highest bid. But there other factors that Toshiba is considering. In addition, "Japanese public opinion will try to block the beleaguered company from selling it off," to a Chinese company.

The game of musical chairs in the bidding process is fascinating to watch form the sidelines because so much is at stake. Obviously Apple wants to ensure a victory so as to secure NAND Flash supply to keep their iDevice sales humming without being held hostage to price hikes in a potentially shrinking market. Will Apple's last ditch efforts pay off? Only time will tell and it's running out for Toshiba.

About Making Comments on our Site: Patently Apple reserves the right to post, dismiss or edit any comments. Those using abusive language or negative behavior will result in being blacklisted on Disqus.